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Trading Lessons

Stocks Bull Market 50% Advance Signals September Opportunity for Deluded Bears

Stock-Markets / Stock Index Trading Aug 29, 2009 - 09:56 AM GMT

By: Nadeem_Walayat

Stock-Markets

The Stocks bull market continued to forge ahead with the Dow closing at 9544, after hitting a high of 9630 during the week, which is a stones throw from the target of 9,750, having advanced 3,280 points and more than 50% in less than 6 months, now it will be interesting to see how the market behaves as it enters the target zone for the termination of this phase of the bull run of between 9750 to 10,000, as my analysis of 5 weeks ago (updated this week) called for a more significant correction to follow than that which transpired during June to July, perhaps just about the time when many of the public bears throw in the towel and the not so smart money starts to pile in as greed replaces fear?


The perma bears having missed the whole bull market as each minor dip was THE end of the mistakenly labeled "bear market rally" for the rules are clear, pick up any reputable technical analysis book and you will read that a bull market is confirmed when an stock indices rallies by 20%, similarly a bear market is confirmed when an indices falls by 20% from a high, therefore regardless of the perma views of this being a bear market rally, whilst under the basis of technical analysis this rally has long since been confirmed as a bull market more than 30% ago! So much for the claims of following the basic tenants of Dow theory!

The stock market's powerful advance of 50%+ may soon give an opportunity for the perma bears to crow loudly as the market heads into the seasonally weakest period of the year i.e. Sept to October, especially as an technically overbought rally is well primed to achieve the anticipated 'significant' correction, perhaps even a crashette, where readers need to remember that the bull market would still remain intact as long as the Dow does not fall by more than 20% from the peak.

Rules exist for a reason, and that is to arrive at a FIRM TRADEABLE CONCLUSION, rather the deluded fixation that is indicative of a perma attitude that are perpetually fixated to one side regardless of the actual price action i.e. the whole rally has been supported by the crash is coming mantra for the past 6 months! A totally useless repetitive statement when it comes to the monetizing of analysis. There is no point in catching a say 15% drop if one fought against the 50% rally, as the net position is still for a 35% LOSS!

The target for the rally from 6470 has been for a move to 9750 to 10,000, at this point in time I continue to favour a price slightly north of 10,000 which would be enough to sucker early bears into losing positions, and as I voiced in this weeks update, the market's strong advance now points to an earlier peak.

Meanwhile the US Dollar continued to play out a double bottom pattern which is potentially bearish for gold, which in itself has traded in a tightening range that is likely to resolve soon, which again perma gold bugs hope will be to the upside though as my dollar analysis suggests it is more probably likely to be to the down side. I will cover Gold's probable trend in an in depth analysis next week as the existing analysis / forecast of January 2009 has expired.

On the topic of stock market plunges, Robert Prechter's latest 10 page Elliott Wave Theorist Newsletter, within which he states that the financial crisis is NOT over and gives a warning he's never had to include in 30 years of analysis. Its Free, so grab it while you can !

Your firm conclusions trading analyst.

By Nadeem Walayat
http://www.marketoracle.co.uk

Copyright © 2005-09 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 20 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis specialises on the housing market and interest rates. Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication. We present in-depth analysis from over 300 experienced analysts on a range of views of the probable direction of the financial markets. Thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

Nadeem Walayat Archive

© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


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